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China Medical Technologies Inc. Message Board

  • superdupacool superdupacool Dec 18, 2008 3:47 PM Flag

    -From Morningstar

    Conflict of interest?
    This is from the Morningstar Analyst Report

    Your thoughts on this fellas:
    We are placing China Medical Technologies CMED under review. The firm announced that it plans to sell its high-intensity focused ultrasound (HIFU) tumor business to Chengxuan International for $53.5 million in cash. Chengxuan is China Medical's largest shareholder and is owned by China Medical's CEO and chairman, Xiaodong Wu. Management claims this transaction will allow China Medical to focus on its higher-margin diagnostics segment and avoid making large investments in regulatory approvals. At first glance, though, we disagree and think the HIFU segment could have garnered a higher selling price. As of the last fiscal year, the HIFU segment made up 40% of the firm's revenue and boasted annual growth rates in the double digits. We think this transaction has destr oyed some shareholder value, and we will consider lowering our fair value estimate on this basis. Also, we frown upon the conflict of interest inherent in this transaction. As the head of both companies, Wu should have excused himself from this deal or sought outside opportunities, in our opinion. We will dig further into this transaction and assess how it changes our near-term growth expectations. We are also transferring coverage to a new analyst and are reassessing our other assumptions for the firm. We will publish a new report shortly.
    Meera Venu

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    • That Morningstar language is about 4 months old, and if it mattered, was priced in long ago.

    • I didn't like it, although as I posted earlier at least he isn't selling the company over-priced crap, which really tanked DRYS and SAY.

      Also didn't like that it was within the range of fair value estimates they received (from whom?) instead of having a real market test.

    • Unfortunately, I think Morningstar is right on with this one.

      I encourage everyone to send an e-mail to IR concerning this issue.

      Here is mine, sent early in the afternoon after having heard the conference call a few times;


      The conference call was very disappointing, and issues of transparencies in the sale of HIFU and purchase of HPD technology remain. Is Mr. Wu being honest here? Things are starting to smell fishy here....

      Too many key details missing, and conference speakers seemed to be walking through a minefield;

      1. Name of consulting company providing valuations for HIFU...... What was the acqusition cost of HIFU, and what is the supposed capital gain the company will be reporting?

      2. Are these valuations different from what they would have been two months ago? Seems like Mr Wu is benefiting from a low valuation for HIFU, while the company is paying a very high price for the HPD technology which is mostly untested in the marketplace. Conference speakers went to great length to talk down HIFU........negative growth...high R and D expenses.......and high capital expenses to get into US and European markets. That is the first time I have heard that................

      3. Did Mr. Wu receive any commissions or kickbacks from the purchase of the HPD technology? Where did he get the $53M to buy HIFU?

      From a valuation standpoint CMED investors have very little to look forward in the next twelve months. We are missing the HIFU sales, which should be replaced over time by the HPD technology.....IF it gains any ground in the marketplace.........while the company is amortizing $16M a year!!!

      Gentlemen................too many transactions where the CEO seems to be right in the middle of everything.

      That can not be good!!!!!

      Now...........I am just praying CMED is just not another Chinese scam!!!!!

      The CEO seems crooked in my humble opinion.

2.560.00(0.00%)Nov 8 3:47 PMEST

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